ABSTRACT
This chapter addresses the means by which firms can implement a diversification strategy. Firms could implement a diversification strategy through three basic means: internal development, M&As and strategic alliances. These three basic diversification modes are also referred to as 'market entry strategies' or 'growth strategies'. A diversification strategy creates value only if the firm purchases or develops businesses for less than the value of their marginal productivity. Each of the three modes of expansion internal development, M&As, and alliances entails specific advantages and pitfalls, so choosing among them involves unavoidable trade-offs. Six sets of criteria should be taken into account when choosing a mode of entry: the extent of market failures; the level of entry barriers; resource commitment and exit barriers; the risk of managerial opportunism; the availability of attractive partners and the types of and motives for the firm's diversification strategy.
